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TMI Blog2000 (1) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... present appeal is directed against this order. 2.Shri K.K. Anand, Ld. Advocate appearing for the appellants stated that copper wire on spools was lying in the finishing room pending quality control tests. He submitted that only after the quality control test was done and goods were packed in boxes, the entry in the R.G. I register was made. It was claimed that for the last several years, this was their practice and that it was in knowledge of the departmental officers. As regards the goods, which were found packed in the boxes, he reiterated the claim made before the lower authorities that the goods were manufactured on the same day. The job of packing was not completed due to power failure. It was his claim that the entry could be made at the end of day and that at that time, the entry could have been made, but for the intervention of the officers. He submitted that it has been held in a number of decisions by the Tribunal, following the judgment of the Andhra Pradesh High Court in the case of Southern Steels reported in 1979 (4) E.L.T. (J 402) that where some goods were not entered in the R.G. I register, but where there was no preparation for illegal removal of those goods, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had checked the stock of manufactured goods (as per the department's circular) with the R.G. I entries. The very fact that a similar case was not early made on the assessees establishes that the departmental officers had not examined this area earlier. 7.The R.G. I register, itself, provides for the slight margin of difference between the assessees opinion and the department's impression. The R.G. I register provides for entries to be made for the goods lying in a finishing room before they are brought to the B.S.R. If it was the claim of the assessees that the goods were in the last stage, namely, quality control, they were required to make an entry in this column. It is acknowledged and accepted that they had not done so. 8.The Central Excises Act and Rules framed thereunder, prescribe a number of procedures to be followed by the assessees. Even before the assessees commence production, the rules provide for registration of the manufacturing unit, filing of a ground plan, declaration of particular raw-materials, disclosure of manufacturing formulae, etc. Before clearance, he is required to file details of classification of the products and their valuation. Correct accountal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book, account or register at all times ready for the inspection of the officers, and shall permit any officer to inspect it and make any such minute therein or any extract therefrom, as the officer thinks fit, and shall, at any time, if demanded, send it to the proper officer." Any person, who fails to follow the provisions of these two rules, faces penal action under both the rules. The penalty portion of rule 226 reads as under : "Any person, who fails to enter the required particulars within the time prescribed in the relevant rule, or who fails to keep such book, account or register, as the case may be, or to deliver it up to the officer on demand or who obstructs or hinders such officer in making any minute therein or extract therefrom, or coveys (sic) away or conceals it, or destroys or tears out any leaf therefrom, or makes any false entry therein or fraudulently alters any entry therein, shall be liable to a penalty which may extend to two thousand rupees and the goods of which due entry has not been made in such book, account or register shall be liable to confiscation." 11.The other rule under which penalties are attracted is rule 173Q (1)(b). The same reads as under : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; * (d) contravenes any of the provisions of these rules with intent to evade payment of duty then, all such goods shall be liable to confiscation." 14. He submitted that this case comes under rule 173Q (a) or (d). In this case, however the goods were seized before they were removed. I do not therefore agree with the contention that this is a case where the manufacturer has removed any goods in contravention of the provisions of these rules. Sri Subrahmanya Reddy, however, attempted to satisfy me that even though there is no actual removal, where there is an intention to remove the goods 173Q (a) is attracted. He argued that in this particular case which is governed by the provisions of self-removal scheme the assessee is authorised to assess the duty himself according to the classification list submitted by him and after doing so he is entitled to remove the goods whenever he chooses. Therefore even if the goods are lying in the factory and the goods are seized at that time, he submitted that as the assessee is entitled to remove the goods at any time he chooses, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that this is not a case of contravention of any of the rules with the intent to evade payment of duty. I am, therefore, of the view that rule 173Q (d) is also not applicable. What becomes clear is that the Court did not go into the provision of Rule 173Q (1)(b) which is material here. It is true that in the impugned notice this provision has specifically not been referred; but that only a reference is made to Rule 173Q. But since this sub-rule alone deals with the situation as it existed, it is apparent that the charge made in the show cause notice is only under this provision. In the cited case of New Polymer Industries reported in 1991 (52) E.L.T. 145, this Tribunal set aside the confiscation on the following observations : "We also set aside the seizure of 500 kgs. of phenolic moulding compound as there was no clandestine removal of the same, in which case alone seizure is justified as has been held by the Andhra Pradesh High Court in the case of Southern Steel Ltd., Hyderabad v. Union of India & Others (1979 E.L.T. J 402)" 16.There is no discussion as to how the judgment of the High Court was relevant to the facts of the case before the Tribunal. In the case of Garden Silk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments, the Tribunal had accepted that the goods were not fully manufactured. In the Pooja Forge Pvt. Ltd. v. C.C.E., New Delhi reported in 1996 (84) E.L.T. 37 (Tribunal), the ld. single Member followed the ratio of the decision in the case of Weston Transformers as well as Garden Silk Mills (supra) for setting aside the confiscation where the goods were fully finished but not recorded in the R.G. I register. The same is the ratio of the last judgment cited by the ld. Single Member in the case of Balls & Cylpebs Ltd. v. C.C.E., Allahabad reported in 1997 (92) E.L.T. 496 (Tribunal). 19.The extracts of the judgments reproduced above ranging from Southern Steel to Balls & Cylpebs Ltd. very clearly show that the various authorities did not examine the provisions of Rule 173Q (1)(b) but that dall (sic) subsequent judgments followed the High Court decision which, itself, was confined to examination to clauses (a) and (d) of this sub-rule. 20.We find that the issue of non-accountal was considered by the Tribunal in two judgments, namely, Indian Cork Mills Ltd. and Others v. C.C.E., Bombay reported in 1984 (17) E.L.T. 513 (Tribunal) and Snack Foods Pvt. Ltd. v. C.C.E. reported in 1987 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssential ingredient has been earlier made by the Tribunal, in their judgment in the case of Willard India Ltd. C.C.E., Meerut reported in 1997 (92) E.L.T. 578 (Tribunal). In this case the Tribunal was examining the penalty imposed upon the assessees under Rule 173Q (1) (bb). The Tribunal in citing the observation of the Supreme Court in the case of Gujarat Tranvarcore Agency v. C.I.T. reported in 1989 (42) E.L.T. 350, held that unless there was something in the language of the statute indicating the need to establish the element of mens rea, it was generally sufficient to prove that a default in complying with the statute had occurred. The observations of the Tribunal would apply mutatis mutandis to instances of contraventions of Rule 173Q(1)(b). 26.It is not that in the present case, there was total lack of intent. As has been observed earlier, the department had stipulated the R.G. I point way back in 1992 which had been publicised in a number of Trade Notices issued by several Collectorates, and should have been in the knowledge of the assessees. Even then they merrily flouted the prescription and continued the wrong practice. Therefore, not only the act of confiscation and imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and no penalty can be imposed under Rule 173Q of the Central Excise Rules. In support of his contention that goods were not liable for confiscation and no penalty can be imposed under the Rules in the absence of clandestine removal or preparation for illegal removal, he cited a series of case law including the following: (1) M/s Kamal Plywood & Allied Industries Pvt. Ltd. v. CCE, Meerut reported at 1996 (82) E.L.T. 323 (TBL), (2) CCE, Chandigarh v. 3-F International reported at 1997 (93) E.L.T. 509 (Tribunal) = 1996 (17) RLT 764, (3) Kartar Steels (P) Ltd. v. CCE, Chandigarh reported at 1997 (93) E.L.T. 43 (Tribunal) = 1997 (18) RLT 138 (CEGAT-NB), (4) Balls and Cylpebs Ltd. v. CCE, Allahabad reported at 1997 (92) E.L.T. 496 (TBL) and (5) Order No. 1638/91-NB dated 28-12-1995. Shri Jangir Singh, Ld. DR justified the action of the department in ordering for confiscation as well as imposing penalty in terms of Rule 173Q of the Central Excise Rules . 32.The charge levelled against the appellants is that the fully manufactured goods were not entered in RG-I register. According to the appellants, the impugned goods were manufactured on the very day the officers visited and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed the penal action for contravention under sub-clause (1)(b) of Rule 173Q. If the department were to take action under 173Q for contravention of sub-rule 173Q(1)(b), for non-maintenance of account, there would have been no necessity of inserting Rule 226 for imposition of penalty for such purpose. It is clear from the wordings of Rules 173Q and 226 that an action can be taken under Rule 173Q for non-maintenance of books of account with intent to evade duty and in other cases Rule 226 prevails. Simple failure could not attract penal action under Rule 173Q. It is well settled that penal provision has to be construed strictly and in favour of the assessee unless the Court is compelled by the language to construe it otherwise. Decisions referred to by the counsel on behalf of the appellants are of the consistent view in holding that no penal action can be taken under Rule 173Q either in confiscating or imposing penalty unless the goods were removed illegally or final goods should have been in the preparation for such removal or they must have been seized while being transported without recovery or gate passes and without payment of duty. Earlier cases Indian Cork Mills and Snack Foo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity so found was seized by the Central Excise Officers on the belief that the said goods were liable to confiscation. The goods were, however, provisionally released to the party on execution of security bond for the value of the goods and production of bank guarantee of Rs.2 Lacs. The Department subsequently, by show cause notice, directed the party to show cause why the goods should not be confiscated under Rules 173Q and 226 of the Central Excise Rules and why penalty should not be imposed under the said Rules and also why Central Excise duty on the entire quantity of goods should not be demanded and recovered from them. The party, in their reply to the show cause notice, explained their process of manufacture and procedure of accounting. As regards 906.03 Kgs. of the SEC Wire found packed in 47 card board boxes, the party submitted that the said quantity could not be considered to have been manufactured on account of the fact that the quality control test on the product was not complete. As regards the quantity of SEC Wire found rolled on spools, the submission of the party was more or less to the same effect. The appellants thus maintained that the process of manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore me as Third Member is as follows :- "Whether in the facts and circumstances of the case the Member (Technical) was right in upholding the order of the Collector in confiscating the goods and imposition of penalty in terms of Rule 173Q; or Goods are not liable to confiscation and no penalty can be imposed under Rule 173Q in the absence of mens rea and only penalty can be imposed under Rule 226 of the Central Excise Rules, 1944 as per the Member (Judicial)." 34.I have carefully examined the records of the case and perused the orders recorded by the learned Members of the Bench which heard the appeal. I have also heard, S/Shri K.K. Anand and Jitender Singh, Counsel for the appellants and S/Shri T.A. Arunachalam and S.Ramanathan, Departmental Representatives for the respondent/Revenue. 35.The short question before me is whether in the facts and circumstances of the case, it was legal and proper for the Adjudicating Authority to have confiscated the goods in question and imposed penalty on the appellants under Rule 173Q and whether that Authority ought to have imposed only a penalty on them under Rule 226. 36.The learned Advocates for the appellants have reiterated before me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for are liable to confiscation and the manufacturer is liable to penalty not exceeding three times the value of the goods or Rs. 5,000/- whichever is greater. It is necessary to pause for a while, having adverted to clause (b) and examine Rule 53, which mandates that every manufacturer shall maintain a stock account and shall enter in such account daily such entries as required under clauses (a) to (g) of sub-Rule (l) thereof. The Department has no case that the appellants had not maintained RG-I register for accounting their daily production under Rule 53 ibid. The Department's case is that the goods (which were seized by the Central Excise Officers on 5-10-1994 from the appellants, factory) were not found to have been accounted for in RG-I register at the time of the Central Excise Officers' visit to the factory. There can be no doubt that such a case of non-accountal of finished excisable goods is covered by clause (b) of Rule 173Q(1) ibid. Again, it cannot be disputed that such non-accountal involves a contravention of Rule 53 ibid. Clause (d) of Rule 173Q(1) ibid provides for confiscation of excisable goods and imposition of penalty on the manufacturer thereof if the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not in preparation of leaving the factory - confiscation under R.173Q set aside - But penalty (reduced) held to be imposable for non-accountal] (iv) C.C.E.v. Moon Beverages [1999 (33) RLT 153 (CEGAT)] - [Excess over R.G.I balance - non-entry of production and clearance in R.G. I from 25-9-1993 to 28-9-1993 (date of visit by C.E. Officers) - Only a technical violation - Confiscation not warranted] (v) Dewan Resins (P) Limited v. C.C.E. [1998 (103) E.L.T. 290 (Tribunal) = 1998 (25) RLT 110 (CEGAT) - [Excess goods found in finishing room - chemical test had not been carried out and goods not ready for dispatch - not entered in RG I - benefit of doubt to assessee - Confiscation and penalty set aside.] (vi) Munjal Showa Limited v. C.C.E. [2000 (116) E.L.T. 684 (Tri.) = 1999 (32) RLT 494 (CEGAT)] - [Excess goods found vis-a-vis R.G. I - explained by the party at the time of seizure - no evidence to disprove explanation - Confiscation under R. 173Q set aside.] (vii) Kanthal India Limited v. C.C.E. [1999 (108) E.L.T. 385 (Tribunal) = 1999 (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld show that in the case of violation of the types referred to in those sub-clauses, intention is not a materia1 consideration. The act simpliciter would invite penal action.] (iii) Autolite (India) Limited v. C.C.E. - [1997 (93) E.L.T. 397 (T)] - [Excess stock found vis-a-vis R.G. I balance - Held liable to confiscation under Rule 173Q (1)(b).] 42.Learned Counsel for the appellants have submitted that there was no finding by the lower authority that the party had attempted to clear the goods clandestinely without payment of duty or that they had resorted to non-accountal of the goods in R.G.I with intent to evade payment of duty. The order of confiscation and penalty was passed on the finding that the party had not complied with Rules 53 and 173G of the Central Excise Rules. Relying on the case law cited, the learned Counsel have, further, submitted that the confiscation of goods and imposition of penalty on the appellants are not sustainable under Rule 173Q in the facts and circumstances of the case especially in the absence of finding of mens rea against them. 43.Learned Departmental Representatives have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty on them is sustainable under Rule 173Q. 47.As regards Rule 226 invoked by the learned Member (Judicial) for imposing penalty on the appellants for non-accountal of the goods in question in their RG-I register, I observe that the element of 'intent to evade payment of duty' is conspicuously missing in the said Rule. While Rule 53 prescribes that a manufacturer shall maintain daily stock account of his finished products, Rule 226 lays down the manner in which such stock account shall be maintained. The latter Rule also seeks to penalise a manufacturer who fails to enter the required particulars within the time prescribed in the relevant Rule and the maximum personal penalty imposable on such a manufacturer is Rs. 2,000/-, The reference (in Rule 226) to "the relevant rule" is a reference to Rule 53. But, I observe, no time is prescribed under Rule 53 ibid for making entries regarding finished products in RG-I register. The appellants had, inter alia, pleaded that, where no time was so prescribed under Rule 53, it was open to them to make the necessary entries regarding the production of 5-10-1994 in the RG-I Register at the close of the day but before they could do so the off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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